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Abstract

[extract] The High Court’s decision in Associated Alloys has authoritatively established for Australia the basic principle that, where the contracting parties specifically state in their contract that they intend to create a trust for the benefit of the seller, as opposed to creating a charge in favour of the seller, a court will not transmute the parties’ expression of an intention to create a trust into an intention on their part to create a charge, unless there is something else in their contract or in its surrounding circumstances to indicate that they are nevertheless intending to create a charge. However, although the High Court demonstrated that the seller and the buyer had not intended to create a charge, it did not quite demonstrate its conclusion that the seller and the buyer had intended to create a trust for the benefit of the seller, as opposed to their having merely intended to create an unsecured debt owed by the buyer to the seller. The High Court did not quite clear the hurdle which obstructed its conclusion that the seller and the buyer had intended to create a trust of the proceeds for the benefit of the seller, that hurdle being the express contractual provision of a credit period to the buyer.

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